Survivorship life insurance can be good vehicle for estate planning

Survivorship life insurance (also known as “second-to-die”) can be an important vehicle to consider for estate planning in the right cases.

This type of insurance policy covers two lives and pays out the proceeds when the second insured dies.

One benefit is that the premium tends to be lower than it would be for two separate policies because the life expectancy is based on the two insureds’ combined ages and the insurer has lower administrative costs. [Read more…]

Should you amend or rewrite your revocable trust?

It’s important to review a revocable trust regularly to see if any amendments are needed, such as when something changes in your life or if the law changes.

There are two ways to go about it. You can either amend the existing trust to change a certain part of it or rewrite the whole trust, which is known as a restatement.

While you might expect that an amendment is easier and more cost-effective, that’s not always the case. [Read more…]

Remarriage is a reminder to revisit your estate plan

Approximately 40 percent of marriages these days are remarriages for at least one partner. When you remarry, there are all sorts of issues to consider related to your estate plan.

For older people, the main focus may be ensuring that their adult children or grandchildren have an inheritance. Without proper planning, a new spouse could receive assets that were originally intended for children and grandchildren.

Here are some important elements to review in order to protect everyone’s interests when you remarry: [Read more…]

Valuation discounts for transfers in family businesses in jeopardy

The ability to take valuation discounts on the transfer of an interest in a family business for estate, gift and generation-skipping transfer tax purposes would be drastically limited under long-awaited proposed regulations from the Treasury Department.

The most impactful element of the proposal bars any significant discount for lack of control or lack of marketability associated with the transfer of an interest in a family-controlled entity.

If the regulations are finalized as written, the tax cost for transferring interests in such businesses will be substantially higher. [Read more…]

Are you up-to-date on the tax rules affecting your 2016 return?

Here’s a quick review of some of the rules you can expect to encounter when you get ready to prepare your 2016 federal income tax return.

Income tax rates. For 2016, ordinary federal income tax rates range from 10% to 35% unless your taxable income exceeds $415,050 when you’re single or $466,950 if you’re married filing jointly. The rate on income above those amounts is 39.6%. [Read more…]

No change to nanny tax threshold

The social security coverage threshold for domestic employees, including nannies, will remain at $2,000 for 2017, the same as the 2016 threshold. If your household workers earn less than $2,000, you do not have to pay social security or Medicare taxes on wages paid to those employees. When you pay your household employees more than the threshold, you’re required to pay social security tax of 6.2% and Medicare tax of 1.45%. The $2,000 threshold applies separately to each employee.

Check your basis in your S corporation before the end of the year

Losses can be hard to take – so if you think your S corporation will show a loss for 2016, now’s the time to plan to make sure you’ll get the full tax benefit.

The problem. The amount of the business loss you can deduct on your individual income tax return is limited to your basis in your S corporation stock and certain corporate debt. This is true even if the loss reported to you on Schedule K-1 is greater than your basis. [Read more…]

Be prepared for a higher social security wage base in 2017

For 2017, the wage base for withholding social security tax from wages has increased to $127,200, up from $118,500 in 2016. The “wage base” is the amount of wages on which employers and employees must pay the 6.2% social security tax. The increased wage base means an additional $8,700 of your income is taxed.

The wage base does not affect the 1.45% Medicare payroll tax. Medicare tax is assessed on all wages and net income from self-employment, including amounts above the base. The 0.9% Additional Medicare Tax is not affected either. That tax applies to your compensation in excess of $250,000 when you’re married filing jointly ($200,000 when you’re single). [Read more…]

Tax reminders

  • December 15 – Due date for calendar-year corporations to pay the last installment of 2016 estimated income tax.
  • December 31 – Deadline to complete 2016 tax-free gifts of up to $14,000 per recipient.
  • December 31 – Deadline for paying expenses you want to be able to deduct on your 2016 income tax return.